Skip to main content

tv   Mad Money  CNBC  June 18, 2012 6:00pm-7:00pm EDT

6:00 pm
negative. >> back here again at 5:00 for i'm jim cramer. welcome to my world. >> you need to get in the game. >> firms are going out of business. he's nuts. they're nuts. they know nothing. >> i like to say there is a bull market somewhere. >> mad money, you can't afford to miss it. >> hey, i'm cramer. welcome to mad money. welcome to cramerica. other people want to make friends. i'm trying to save you money. my job isn't just to entertain but to educate and teach. call me at 1-800-743-cnbc. we are blessed with not one but two eyes. two of them. on days like today where the dow slipped 25 points, s&p edged up .4% and the nasdaq gained .78% we have to remember to use both of our eyes.
6:01 pm
why am i starting the show with this manic anatomical lesson? pretty simple. right now we keep hearing all eyes are on greece. yesterday's election or all eyes are on spain, spanish tenure yielding 7% where countries are having trouble paying bills. all eyes are on germany. i disagree with all this nonsense. i'm not a foreign correspondent, not a professor of geopolitics. i'm not gunning to be secretary of state and i don't run a macro hedge fund. i don't need both eyes on germany, spain, italy, france or greece or anywhere in europe. one eye will suffice. the moment i take one eye off america and put them on europe i will lose my chance to help to try to make you big money. that's what i'm paid to do. this morning i was chatting
6:02 pm
within squawk on the street. we were all struck by how we have been -- how it could hurt us and how we'll likely keep talking about it for the next year. while we have to focus on it, we can't let us blind us to the next big opportunity. now i know that europe is totally perilous. i know it is. i'm not telling you to ignore it. but my co-host did get me thinking. what if we had one eye on america last year instead of both eyes on europe -- all eyes on europe. could we have made some money? would it have been too hard? would the winning stocks have been too obscure for one eye to let us see them? it was too obscure if you only looked at averages as a whole. the s&p made 6%, dow 5%. not chump change but maybe not enough to keep you in the game
6:03 pm
given how horrid europe is. we are not indexers on "mad money." this show is dedicated to the proposition that you can beat the averages with your brain, you can score above average returns by looking around, doing homework, exercising some common sense. not macro hedge funditis. what would the one eye that you might have left on the domestic side of things produce? what would you have seen? let's look at the world as we have seen it and overlay it with how the individual stocks and the most widely quoted index there is, the dow jones industrial average 30 have done. we all know them. first, the one eye on europe would tell us to avoid any company that does substantial business over there. take that part of the dow out. that's getting worse by the day. we knew it last year. the same eye says stay away from financial companies. they could be linked to european banks in ways we don't want to find out about. our single eye on europe would tell us to avoid companies that
6:04 pm
produce commodities because europe will slow the use of commodities. get rid of those stocks. the same eye would let us see we would be mired in a low growth world. therefore we would be seeking higher yield whether it's bonds or stocks because in a low growth world interest rates go lower. how can we get the most income? what would that leave us? you get rid of all those things. what would it leave us? it would leave us with, let's see, the eagle eye on europe would have kept us out of about two-thirds of the dow. left us with one third. the eye on america would have produced amazing returns on the one-third. first we would have been drawn to stocks with no european exposure. how did they do? take a look at the index. two -- home depot and walmart. two uniquely american plays and they were up 52% and 29%, the first and third best performers in the index. would it have been that hard to spot them? wouldn't it dove tail with the negative view of europe?
6:05 pm
ask someone who shops at both stores. i think it was reasonable to presume you could have visited the places, seen the crowds, recognized that they are american companies that they can boost the dividend and you would have nailed them. who else in the dow is domestic besides home depot and walmart? how about verizon and at&t. they don't have any international operations. sure enough verizon rallied 23% in the last year. at&t up as well. would they have been hard to spot since they were yielding 5.5 and 5.6% respectively. they were there for the asking. you did keep one eye on europe. consider again the notion of the need for yield nd n a low growth environment. from companies that cannot only pay higher dividends but boost them. who fits that depiction in the dow? how about intel? that yielded a year ago. both of the companies have far more exposure to emerging markets than europe. both have amazing balance sheets. they were in a fantastic position to raise dividends.
6:06 pm
how did they do? second best performer in the dow was intel. microsoft was up. what else may have appealed to us with one eye on europe? how about walt disney? there is a euro disney but the main drivers are the american television networks, movies, theme parks, espn. is there any real wonder that disney rallied 24%. the dow's best performer. i think one eye on europe would have spotted disney simply by not having it over there. seven of the top ten performers in the dow were available. i don't think the one eye prism would have produced the others. all three have substantial businesses in europe. only coke would have been attracti attractive. i would posit that precisely because you were aware of the issues in europe you should have been able to ice late the best performers and pounce. on them. some of the weiss disease acres are saying, come on, cramer. it's rear view. don't underestimate the importance of the exercises i
6:07 pm
have walked us through. too many lazy people want you not to pick any stocks at all because of the hazards of europe. i'm taking it one intellectual step further saying the money has to go somewhere. it can't all go toward u.s. treasuries. that's not how big money is managed around the globe. a certain percentage goes to equity. that will flow into big cap companies far away from europe geographically or protected by high yields from the slow to no growth contagion europe represents. guy at home depot yesterday asked me, boy, i'm worried about greece. look around, man. home depot's packed. it's that obvious. by all means keep an eye on europe. you need to know what can go wrong. keep the other eye focused on the opportunities in american stocks that are created by the insanities across the atlantic. they are the corollary, the reaction. we can get them. because we're going to talk about europe a year from now and just like we could have said
6:08 pm
last year we could have said, listen, europe, no. uh-uh. there is a big difference. on this show we'll keep an eye on america. if you kept an eye on the 30 stocks in the dow jones industrial average you would have had a darn good idea which ones would be up double digit. prenot presume europe will mire us for another year and demand similar performance. bo in michigan. >> caller: boo-yah from south gate, michigan. >> what's on your mind, chief. >> caller: college student from central michigan, fire up, chips. i have been watching first solar. with the recent demand for solar panels in japan what do you think about the company? >> you would be playing a rumor, alleged takeover, subsidies like they got out of japan which boosted it today. that's not good enough for me. i would rather be in a company that -- i will tell you the truth. applied materials. let's go there. applied materials has a decent
6:09 pm
business in solar. applied materials has a nice yield. i would rather see you in applied materials yielding 3.2% than i would have you in first solar. mark in florida, please. >> caller: hey, jim. big boo-yah from central florida. how are you today? >> real good. how about you? >> caller: just great. i want to check on your strategy if you have any on bank of ireland and what will happen after the elections. what are you thinking about that? >> bank of ireland is a sucker's play. people are drawn to lower dollar stocks. i get it. ireland is in terrible trouble. i just came back from there. i don't think that bank stock represents real value. i don't want you there. 20/20 vision these days means one eye on europe. i don't want both eyes on europe. if you have one eye on the usa you will see what's going to do well simply because europe is so bad. we can focus on the losers or
6:10 pm
try to figure out how it makes winners in the united states. "mad money" will be right back. >> announcer: coming up, on the flip side -- not everyone is expressing sorrow about the slide in natural gas in the past year. in fact, some companies are cashing in. tonight, cramer checks out one name that could fuel up as the commodities tumble. later, starbucks showdown. two analysts, two sides to this java giant. this market's only big enough for one. things could get rough as jim takes a stand on whether the coffee king can continue to grind out profits or if it's overcaffeinated. all coming up on "mad money." >> announcer: don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer, # madtweets. accepted an e-mail to or give us a call at
6:11 pm
1-800-743-cnbc. miss something? head to this message. back from the worst economic depression. almost 4.3 million new jobs we're still not creating them president's jobs plan firefighters, police officers, work. right now. wealthiest americans congress refuses to act. tell congress we can't wait. high schools in six states enrolled in the national math and science initiative... ...which helped students and teachers get better results in ap courses. together, they raised ap test scores 138%.
6:12 pm
just imagine our potential... ...if the other states joined them. let's raise our scores. let's invest in our teachers and inspire our students. let's solve this. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. see your lexus dealer.
6:13 pm
6:14 pm
as much as our markets are hostage to the european mess the truth is trying to invest in europe is a sucker's game. we have been hearing for weeks the greeks had to elect a pro europe faction when they went to the polls or the western financial world would collapse. greece did everything it was supposed to and it didn't matter. we just shifted our focus to the next crisis, the spike in spanish bond yields which will happen within 66 minutes of celebrating greece which leads me to this observation. stop trying to game europe. i know it's important which is why i'm keeping you apprised. one eye on it. there is nothing you can do about it and no way to profit from it unless you avoid it and focus on domestic winners, not international losers. that's why i'm looking for stories to work regardless of what goes on in the european union. we need trends that transcend the euro zone, greece and spain.
6:15 pm
i have one for you tonight. i'm talking about how to profit from the ultra low price of natural gas here in the u.s. we know who the losers are from cheap natural gas. the company that is find and produce the stuff. the drilling companies you see on the 52-week low. the ones that come to me saying, why are these down? look at the prices of oil and gas. there are a ton of nat gas winners we don't talk enough about. namely the companies that need to buy natural gas as one of the largest or the largest input cost other than labor. we got terrific results from owens, illinois. ppg was just fantastic. sherwin williams. these are companies that consume huge quantities of natural gas. the winners trade is still on, especially with the chemical companies since they consume the stuff like a fat kid eats cake. it was up again today. something people have been predicting for ages despite the weakness in fuel. the reality is the price of nat
6:16 pm
gas will be low in america for the foreseeable future. it's now at $2.64 per million british they areal mall units. we have such a glut of fuel with no way to export it for years. i bet prices remain in the dumps for a very long time. many, many years. certainly long enough to put up plants and capitalize on it. unlike the nonstop craziness in europe. cheap natural gas you can rely on. let me into use you to a company i haven't liked on the show and it's been right. a company called celenese, a specialty chemical maker founded a century ago. it's only been in this current incarnation since 2005. when it was brought public they had taken them private a year earlier. now the stock has been just hammered. that's a reason i want to call your attention to it. it's fallen 27% from the early february highs. it's finally gotten to a point where it is too attractive to ignore. what does celanese do?
6:17 pm
they make acytyl. they make engineering resins, plastic used for light weight car parts. the company is a consumer's best. they make acetate tow, a soft material used in filtration products, cigarette filters. and they have industrial business where they make emulsions used in paints and coatings and performance plastics for films, lamination films, solar panels and medical devices. these are the building blocks of the u.s. economy. what do these disparate economies have in common? they all use natural gas as a feedstock. it's a crucial input needed to create virtually all of the products just mentioned. celanese uses so much natural price it adds 15 to 20 cents to the bottom line. significant given they are
6:18 pm
expected to earn $4.52 a share and nat gas is down. they are jumping on the natural gas bandwagon, making moves to capitalize further on the ultra low price of the commodity. companies selling $500 million to a billion dollars on a new facility in texas that should be profitable even if the price triples. our country is lower than any other country in the world. it should be up and running july of 2015. expect to add 65 cents per share in 2016 because they are taking advantage of a loser commodity. beyond being a winner the company is a turnaround story. the most recent quarter on april 24 was a disappointment. remember, i have not liked celanese. if it weren't for natural gas going down i wouldn't. they had a miss off a 77-cent basis and blamed europe for the weakness. that's why the stock was crushed. but the new ceo took over before
6:19 pm
the latest quarter. i think he can deliver a long-term term. he has a fabulous track record. he was chairman and ceo of another chemical company from 2003 to 2011. the earnings rose 22% compound annual growth rate for the eight years he was in charge. that's impressive. i like what he's done. we know to execute a turn you need to underpromise and over deliver. he reduced the selling guide from 6 to 5.50. you need the barlower. it makes it easier to beat. he plans to double the company profits within five years by moving into higher value added products. think he can do it. i like that he raised the dividend 25%. it's .6% but management plans to boost it to 1.5%. that inspires confidence from me. it gives them a big cost advantage.
6:20 pm
the company gets 30% of sales from asia where it may not be as bad as people think, especially with china cutting rates. the transports today was because we think china will cut rates, going higher. we have seen improvement in the business since the latest disappointing quarter. many of the companies and markets are getting higher. autos, aerospace and the u.s. housing market. it trades at seven times earnings, 10% long term growth rate. it's a bargain. the company has a huge analyst meeting come september talking about the trends i have mentioned. in the topsy turvy market you need to shop for trends like natural gas. who can capitalize on it? understand most of our industrial companies have not yet figured out a way to harness the incredible national competitive advantage we have over everywhere else in the world. they are putting the money to work, hiring people, building new plants and recognizing that it can make product cheaper here, too, which is why i
6:21 pm
believe the long-term story for c.e. will be brighter than that of its competitors. c.e. may be one of the biggest beneficiaries of the north american industrial renaissance i talk about that's coming here because of our national glut of natural gas. after the break i'll try to make you even more money. >> announcer: coming up, starbucks showdown. two analysts. two sides to this java giant. but this market is only big enough for one. things could get rough as jim takes a stand on whether the coffee king can continue to grind out of profits, or if it's overcaffeinated. and later, head west? nat gas went from sliding over the past year to recently rebounding off its lows. but is it enough to drive growth for pipeline player markwest energy? cramer talks to their ceo just ahead. all coming up on "mad money." with the spark miles card from capital one,
6:22 pm
6:23 pm
thor's couture gets the most rewards of any small business credit card. your boa! [ garth ] thor's small business earns double miles on every purchase, every day! ahh, the new fabrics, put it on my spark card. [ garth ] why settle for less? the spiked heels are working. wait! [ garth ] great businesses deserve the most rewards! [ male announcer ] the spark business card from capital one. choose unlimited rewards with double miles or 2% cash back on every purchase, every day! what's in your wallet? [ cheers and applause ] that's a good thing, but it doesn't cover everything. only about 80% of your part b medical expenses. the rest is up to you. so consider an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement plans, they help save you up to thousands in out-of-pocket costs. call today to request a free decision guide.
6:24 pm
with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients... plus, there are no networks, and you'll never need a referral to see a specialist. join the millions who have already enrolled in the only medicare supplement insurance plans endorsed by aarp... and provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. with all the good years ahead, look for the experience and commitment to go the distance with you. call now to request your free decision guide. ♪ ♪ oh, man. what should we do with starbucks? it's not easy these days. last friday two different brokerage houses had two different takes on the fabulous growth company that's made so much money for shareholders. on the one hand, u.p.s. comes
6:25 pm
out and says the momentum of starbucks may be slowing. they see the same store sales decelerating. they don't see a catalyst. the same day though opco says starbucks has a wave of catalysts coming and the decline gives you the perfect opportunity to get in. you know what we like to do on "mad money" when we get this kind of analyst face-off pitting two pieces of research that disagree against each other is a great way to familiarize yourself with the strong parts of the arguments and figure out what you believe. why is it important? say starbucks drops $2 tomorrow. at least you know why you may see something negative. what's the right thing to do with starbucks which was up nicely today? first of all, both ubs and opco rate the stock a buy. they both like starbucks. but there is a big difference between giving a stock a buy rating and then saying its momentum is slowing and rating it a buy while you predict a
6:26 pm
huge wave of catalyst. let's start with the more bearish case. analysts think starbucks may be trading sideways in the near term. this is research saying they are ordering a decaf. what's the problem? ubs did the consumer panel analysis. they are breaking a modest slowdown in domestic same store sales during the first two months of the quarter. they see same store sales growth for the quarter. not super fantastic or terrible. certainly better than most retailers. not what you want to see if the stock is going to go higher. ubs cut numbers for starbucks, but that's because the company itself cut the earnings in the last week. starbucks shaved a penny off because of the cost of the $100 million acquisition of a small bakery not much different from panera bread. and they are concerned as it seems almost everybody is that
6:27 pm
starbucks's european business isn't doing well. it only accounts for 2% of the profits, but they have europe sit's sell, sell, sell. all in all ubs likes starbucks but think it could be dead money for a while as you get a rotation toward more long-term. when i read i wanted to sell and i like starbucks. how about the bullish analyst at opco? the picture opco paints is so positive you would think it's a different company. opco makes the case of starbucks running on all cylinders, like it's running on dunkin. deceleration is unlikely to say the least. they think the fundamentals are robust and it could get better. starbucks makes more money from the k-cups where they make pods for the keurig single cup coffee brewer. the analysts have a hot hand in the space and i like it. they downgraded it to mcdonald's from outperform to plain old perform. that's wall street speak from
6:28 pm
buy to hold. now back back in january 24 when it was 98.75. now mcdonald's is at 90 dollars. my charitable trust has been buying it under 90. i like that the guys told you to get out when it was higher. that's good analytic work. but they aren't wearing bullish blind rs. when opco says starbucks should benefit i have to take them seriously. good track record. starbucks is launching a whole new slate of products this summer from hand crafted healthy refresher drinks to premium fruit juices. not only is starbucks taking a share in coffee pots from keurig where they have 15% of the premium single cup market they are challenging green mountain with their own machine, barrismo to compete. they will sell it and all of the associated coffee pots across multiple different countries. when starbucks announced the
6:29 pm
move it caused green mountain to lose 15% in a day. it doesn't have to be as successful as the keurig. what else? opco sees starbucks's china business expanding rapidly and that's important. it's one of many reasons i have been a fan of starbucks for so long. management thinks they can expand from 550 locations to thousands and thousands in the future. i'm with management. there is more. starbucks partnered up with coinstar. i know, but listen to me. they partnered up on the red box video rental thing. they will have 500 kiosks serving seattle best brand. have thousands in pharmacies, shopping malls, grocery stores, name it. plus they are moving into the energy drink business. by the end of the year they will have the new low calorie energy
6:30 pm
drink. look at monster stock. great things happening in the next six months. you can see why opco would ride the wave higher. i think opco is right and ubs is too negative. it's hard not to be bullish when you consider howard schultz, the ceo, has a tremendous track record of executing on big ideas and has pretty much promised that he will not rest until he fixes the slow down in european operations. credibility? this man promised us he could turn around the whole company starbucks when he returned as ceo in january of 2008. the stock was $19.80. now the stock is at $5 a 4.18. that's up 179% including dividends. come on. he turned around the company. that will be easier than turning around the chain. the price of coffee is going down big. that's terrific for starbucks.
6:31 pm
coffee is down 33% year to date. that price is expected to decline further in the second half. this is the big cost for starbucks and it's shrinking. i know i pay the same high price for my triple venti cappuccino with skim wet this morning. you have to like them charging the same price though their raw cost is down. that's good business. starbucks is nine points off selling for 23 times next year's earningses. the stock is too good to pass up. somehow ubs sees a company with few catalysts. they say, half. could be 50/50. as we see opco was right to talk about the wave of catalysts to push starbucks higher which is why it's a buy. ubs looks at the coffee cup and says it is half empty. opco views it as half full. i'd rather pay the low price now than have to pay more when
6:32 pm
everyone can see the cup is being filled to the brim with red hot latte. carol in colorado. >> caller: boo-yah, jim. >> boo-yah, carol. >> caller: what do you think of marine mountain coffee roasters. i feel like i should have sold it weeks ago. now we have news today about the grocery stores coming up with their own. >> i don't want to touch it! my friend herb greenburg raised enough question. remember, herb doesn't tell you to buy or sell anything. his job is to present skepticism. he's skeptical. the lack of skepticism by people who like green mountain is wrong. i'm with herb. it makes me nervous. i want you in starbucks. jerry in new jersey. >> caller: how you doing, jim? jim, my wife and i are eating healthier with food products from smart balance. smbl. what's your opinion of the
6:33 pm
stock? >> wow. i've got to do work, man. you know, i like whole foods and hane and dean foods. maybe this is -- look at that dean foods 52-week high. let me come back. i have work to do, i love it. when you give me new ideas it makes my day. i will never tell you i like it if i don't know it. i don't know that one well enough to opine. opco thinks starbucks can be the cream in your portfolio's coffee. i agree. i just wish the stock weren't up so much today. i was trying to nail it all weekend. it's not too late. starbucks is going higher, not lower. stay with cramer. >> announcer: coming up, ride the lightning. take a nonstop thrill ride as cramer goes stock after stock. all your calls taken rapid fire on the lightning round. and later, head west?
6:34 pm
nat gas went from sliding over the last year to rebounding off its lows. but is it enough to drive growth for markwest energy? cramer talks to the ceo ahead. all coming up on "mad money."
6:35 pm
6:36 pm
6:37 pm
[ bell ringing ] [ bell ringing ] it is time. it's time for the lightning round. i take your calls and you tell me your stock. i tell you to buy or sell. we'll play until i play this sound -- [ buzz ] -- and then the lightning round is over. frank in new york. >> caller: new york city boo-yah, jim. me and my family love you and the show. thank you for the hard work you do. we appreciate it. >> thank you. >> caller: i have been holding onto my stock shutterfly. >> i'm not going to opine on it. i used it recently and i liked it so much -- thank you to linda who got me my pictures, my assistant. i have to go look at them again. i promise within the next seven days i will have a judgment.
6:38 pm
niko in california. >> caller: my symbol is d.n. >> no, no, too risky. we have been up and down the block on this one. it's not selling as well as it should. i'll send you to johnson & johnson. mike in new york. >> caller: hi, jim. boo-yah and thanks for all you do to educate the retail investors. >> i try. >> caller: my question is pitney bowes. >> last time they were here the stock was at 19. i'm worried about the dividend. out's in red flag territory. it yields 10%. something's wrong. i want pbi to tell me why i shouldn't worry about the dividend. i can't opine until then. jose in texas. >> caller: hey, jim. boo-yah from houston, texas. >> good to have you. >> caller: home to be of the
6:39 pm
texas houston super bowl champs. my stock is crown castle international. ticker cci. what do you think? >> i think you have more horse sense when it comes to stocks than football. crown castle is good. so is american tower. the group has been extraordinary. i'm with them all the way. you've got good tower sense. matthew in new york. >> caller: hey, jim. a new york yankees b-b-boo-yah! >> yes, sweep this, sweep that, boo-yah. >> caller: my question for you is regarding boeing, b.a. should i hold or sell it? >> my charitable trust owns it or i would be eating this hat. i have a yankees hat on so you know. boeing is terrific. mostly what i like is that airbus can't seem to make it. b.a. is a buy. warren in louisiana. >> caller: hello, gjim! a big louisiana boo-yah to you.
6:40 pm
many, many more. >> i will give you a tulane boo-yah back at you. >> caller: i'm calling to discuss interdigital corporation. >> steve miller is right. i want you to take the money on the gain and run. $6 sayonara. charlie, please. >> caller: boo-yah, jim. calling from beautiful florida. >> fantastic. go ahead. >> caller: yeah. i'm a first time caller, long time listener. my stock today is tipx. it's been acting badly. >> it has. we heard good things about the cloud from oracle tonight. i think they're safe to 30. at that point we are going to ring the register. we're tired of being beat up. it's too inconsistent even if the company seems to generate consistent returns. got to call as i see it.
6:41 pm
that's the conclusion of the lightning round. >> announcer: the lightning round is sponsored by td ameritrade. special ops mission? you'd spot movement, gather intelligence with minimal collateral damage. but rather than neutralizing enemies in their sleep, you'd be targeting stocks to trade. well, that's what trade architect's heat maps do. they make you a trading assassin. trade architect. td ameritrade's empowering, web-based trading platform. trade commission-free for 60 days, and we'll throw in up to $600 when you open an account.
6:42 pm
mcallen, texas. in here, heavy rental equipment in the middle of nowhere, is always headed somewhere. to give it a sense of direction, at&t created a mobile asset solution to protect and track everything. so every piece of equipment knows where it is, how it's doing or where it goes next. ♪ this is the bell on the cat. [ male announcer ] it's a network of possibilities -- helping you do what you do... even better. ♪
6:43 pm
just because the green bay
6:44 pm
packers did the right thing this weekend doesn't mean we can afford to stop playing it safe. in this market nothing provides more safety than a big juicy dividend. take markwest energy partners. massive partnership with a 6.3% yield hammered over the last month and a half lowering the price of oil. stock is down 17% since may. i think it's time to circle the wagons. markwest isn't just any pipeline company. it's a gathering, processing and transportation play for natural gas. they own a host of networks of small pipelines, collect natural gas from points near the wells to be taken to a larger pipeline. markwest has a big processing business where it removes contaminants, separates raw natural gas into pipeline quality gas and various liquids. ngls. though oil and gas prices are down in the dumps this is a terrific business. the largest natural gas processor in the marcellus shale, and they are beginning to build up in ohio, the next big shale play. the company has assets all over the southwest.
6:45 pm
not only does markwest give you the juicy 6.3% yield it is growing the payout aggressively. contributions have grown since 2002. the latest quarter reported may 7 was better than expected. they had a bullish analyst day june 1. don't take it from me. let's talk to the chairman and ceo of markwest, frank semple. welcome back to "mad money." >> thank you. appreciate it. >> thanks for coming on the show. this morning i was on "squawk on the street" and david faber asked who i had on. i said it was you. within the next hour, same question over and over again. ask him what's the matter? why are they going down? i don't want to put you on the spot for the industry, but the weakness has been profound. what do you think is behind it? it has been an ugly six weeks.
6:46 pm
may was ugly. mlps as an industry was down 8% during may. we were down significantly more than that. it's driven primarily by uncertainty in the global markets which is impacting commodities and crude oil specifically. a lot of companies have a lot of length in crude. it's tracking, but to me it's irrational when you think about it. >> this is what i want to get at. a lot of the business is fee-based. some of it you hedge, but if you had to put a relationship between an occidental, sun oil, hess versus, say, you. the sensitively is not nearly as great. you are trading as if every oil tick down you get hurt. >> again, as far as markwest is concerned specifically we are long in gls. there is not a good understanding --
6:47 pm
>> natural gas liquids. >> right. there is not an understanding about our hedging program and how we protect the down side. plus our o oting income is fee-based and growing significantly. >> right. >> essentially 85% of all the investments today are for fee-based contracts. though we do a lot to demystify the business, we are a gathering and processing company. >> right. >> we are in most of the large shale plays. a lot of natural gas liquids are produced. there is a perception that the gathering process and companies with ngl exposure have risk when it comes to the global economy driven by crude oil prices. >> okay. you in your excellent long -- your big brochure, your show, you have propane, butane, natural gas, ethane. all of these are in glut to some degree in the country. what does that say about your earnings per share and the
6:48 pm
ability to raise the distribution going forward if the products you're gathering are in glut? >> well, it's a great long-term situation. being long the natural gas liquids, whether it's propane, methane or butane, natural gasolines, it's a great place to be long. we can talk about it because the correlation with crude oil, long-term prospects for crude oil. but the glut you talk about is driven for propane. we are producing ethane now but we have had a lot of the crackers in the gulf coast that have been down. >> the refinery process. >> $250,000 barrels a day, a significant part of the complex have been down. they are coming up through the last half of the year. and the long-term prospects for ethane are bright because there are more and more of the petrochemical industry beginning to convert to ethane-based fee stocks. so i would like to talk about the fact that long-term, even
6:49 pm
with all the production of ethane coming online with the shale plays the fact is ethane has a very bright future. so many conversions are taking place. in the worldwide economy even if weak they will need the demand -- continue to drive the demand for ethane. >> let's step back. i think your story gives you a yield, but you have tremendous amounts of money in utica which is in ohio. a lot of jobs in marcellus, pennsylvania. do we need to see for your business to explode for america, start your natural gas engines. is our issue that your business could explode to the upside if we in this country recognize how much oil and gas there is in places like ohio and pennsylvania? >> well, jim, as you know, the demand for natural gas will be driven over the long term by power generation and increased heating. transportation is a key part of
6:50 pm
that. but the energy information agency is projecting that by 2020 natural gas demand will increase 17%. that's a lot. the majority will come from shale plays. so we are in the right place to support that growth. it's sort of a no-brainer. we need to continue to move towards more transportation with natural gas demand. it's happening. it will take a while. frankly, that energy information agency projection has very little in it for transportation. it's the right thing to do. it's cleaner. 30% less emissions from natural gas vehicles than gasoline engines and cheaper. half the cost on a miles per gallon basis to use natural gas. that's a great article. i love it. >> i do, too. >> it's not the big explosion. it will happen gradually. >> it's a matter of time. thank you. that's frank semple of markwest energy partners. the stock is down. you get a great yield and it's a matter of time before this country harnesses all of the
6:51 pm
natural gas material that is go through mwe's pipeline. thank you very much, sir. [ male announcer ] at scottrade, we believe the more you know, the better you trade. so we have ongoing webinars and interactive learning, plus, in-branch seminars at over 500 locations, where our dedicated support teams help you know more so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying...
6:52 pm
ll ] i'm with scottrade.
6:53 pm
okay. does the lack of volume matter? should we fret about how the number of shares each day continue to decline? depends on where you sit. if you're working in the exchange or brokerage firm you have to wonder if there is a secular decline going on that's severe and i are reverse nl. as i see it it has to do with
6:54 pm
disintegration of asset class as a method of saving. stocks return on mass have been too inconsistent. individual stocks are creating incredible returns. the mechanism seems to have stopped working to maintain the trust of the average american. one month ago facebook are emblematic of the lack of trust. people knew they took risk when they bought stock but this is a broken system because you did nothing more than bought stocks. not because the fundamentals of the companies. the sudden decline in the face of -- nothing revealed perhaps the market was some sort of plaything for high frequency traders that has nothing to do with savings or retirement. the flash crash changed things to the point where someone could argue you are being reckless if you own stocks. the facebook fiasco took it a
6:55 pm
step further. as horrible as that decline was you had the opportunity to sell when the market came back. not so with facebook. a difficult issue when in many cases you didn't know if you owned the stock to begin with. i think of the moment a month ago where many folks watched the decline of the stock wondering do i own it? they won't let me sell. it was the equivalent of having your debit card swallowed by the atm machine without any 800 number to call. what's amazing is the institutions with so much on the line are doing so little to reverse the volume trend. i never hear brokers address the issue about the frailty of equities head on. exchanges aren't doing much either. given the degree to which regular people soured on stocks you would expect the broke rs and exchanges would have rigorous self-examination about what's wrong with equities. perhaps in conjunction with the government. there is no urgency about the
6:56 pm
volume issue among any constituencies. personally, i don't care. i care about not the volume but the price. can people make money owning the right equities? can they buy stocks able to climb in price? as long as investors make money in stocks i am indifferent to volume. nevertheless i find it shocking that those who are dependent on volume to make money seem to be doing nothing to reverse the trend. in the end the exchange is the brokers, not the owners of good stocks are the real losers in the post flash crash, post facebook regime. stay with cramer. [ male announcer ] trophies and awards lift you up. but they can also hold you back. unless you ask, "what's next?" introducing the all-new rx f sport.
6:57 pm
this is the pursuit of perfection. and i thought "i can't do this, it's just too hard." then there was a moment. when i decided to find a way to keep going. go for olympic gold and go to college too. [ male announcer ] every day we help students earn their bachelor's or master's degree for tomorrow's careers. this is your moment. let nothing stand in your way. devry university, proud to support the education of our u.s. olympic team.
6:58 pm
6:59 pm
to provide a better benefits package... oahhh! [ male announcer ] it made a big splash with the employees. [ duck yelling ] [ male announcer ] find out more at... [ duck ] aflac! [ male announcer ] ♪ ha ha! seconds away on "the kudlow report." now that we jumped the hurdle in greece, is spain a bigger problem? where's president obama's growth leadership to protect our markets? former american express ceo harvey golub talks flat tax and why can't anything get done in washington? are we being taken to the cleaners by russia? they are sending warships to syria now. "the kudlow report" is moments away. okay. something's afoot here. i saw it in the transports all day. not just the airlines. talking about


info Stream Only

Uploaded by TV Archive on